The end of school property taxes?

Sunday

May 5, 2013 at 12:01 AM

While proposed state legislation seeks to eliminate school property taxes — the bane of many Pocono homeowners — don't start celebrating just yet. There's a loophole large enough to drive a fat tax bill through.

HOWARD FRANK

While proposed state legislation seeks to eliminate school property taxes — the bane of many Pocono homeowners — don't start celebrating just yet. There's a loophole large enough to drive a fat tax bill through.

Senate Bill 76, co-sponsored by state Sens. David Argall, R-29, and John Yudichak, D-14, would eliminate the school property tax, funding education through money raised by increasing state taxes.

That includes raising sales tax from 6 percent to 7 percent and the state's personal income tax from 3.07 percent to 4.34 percent.

It's a pretty drastic change from the current funding formula, which Argall calls unfixable.

"Our goal is not to fine-tune the tax, but to drive a stake through the heart of the tax and replace it," he said. "When you're looking to replace $10 to $11 billion you don't try to do it with a tax on bubble gum."

The state House has a similar bill in the works.

The current funding through property taxes "may have made sense in the 1800s, but it doesn't today," Argall said.

He was one of 10 participants in a round-table discussion hosted by the Pocono Record to discuss ways to relieve the burden of school property taxes on homeowners.

"The burden's placed on the backs of those who can least afford to pay," Yudichak said.

The current funding law is based on property values and the idea that income and property are tied together, and that's just no longer true, said East Stroudsburg Business Manager Jeff Bader.

On the other hand, the property tax allows the community to control decisions regarding education.

"Property tax is the only tax that can be varied by school district," said Jeff Ammerman, of the Pennsylvania Association of School Business Officials.

Many in the room worried that funding education solely through state income and sales taxes would centralize education decisions at the state level.

"It also totally takes away the control of local school boards from saying, 'How much do we want to invest in our students?'" said Jim Buckheit, executive director of the Association of School Administrators.

Property tax is a stable source of revenue, according to Buckheit. "Sales tax is not. It goes up and down with the economy."

Yudichak disagreed.

"Sales tax has been a pretty steady stream over the past few years," he said.

The tax reform bill requires 26 co-sponsors to get it to the state House of Representatives. It has 19 now, Argall said.

A provision in the Senate bill, though, allows school districts to tax property owners for construction debt. And Monroe County school districts have a lot of that.

Years of population growth spurred school construction, resulting in decades of future debt.

East Stroudsburg has a $13 million-a-year debt service that it will be paying for years. Other districts in the county are in the same boat. So, under the proposed legislation, property owners here would still be hit with school property tax bills.

Argall said though that, under his legislation, Pennsylvanians would get an 80 or 90 percent reduction in their property taxes.

The process of creating new legislation puts bills like SB 76 through an evolution of changes, according to the senators.

"We need to drive the conversation," Yudichak said. "We need to make the governor understand we need to make this a priority."

Yudichak said the state missed an opportunity to tax natural gas extraction to support education.

Gaming has failed to live up to initial revenue projections. And funneling table game revenues into the state's general fund rather than dedicating it to education has not only deprived property owners of additional tax reductions but is at odds with the original intent behind legalized gambling.

Little time was spent discussing the expense side of the school funding equation, which makes it harder to balance school budgets.

School districts are under pressure from state mandates, like prevailing wages that inflate the cost of building new schools, said East Stroudsburg Area School District Superintendent Sharon Laverdure.

"Special education funding and charter schools are also increasing costs of education," said Ken Koberlein, the district's former superintendent.

Yudichak said educators and administrators are put in the bull's eye when it comes to costs.